In 2010 hedge-fund manager John Paulson had the best year in the history of investing. Paulson's net income from his various ventures, but mostly his own personal investments in his own funds, was more than $5 billion. $5,000,000,000!
This tops Paulson's previous record of $4 billion which he made betting against the housing market in 2007. This time most of his riches came from investing in gold, which rose about 45% during the year.
There's two ways of looking at this: crediting Paulson for his daring and his intelligence and saying it's proof that our system is for the most part a meritocracy where the achievements of the individual are unlimited. Others say the system that allows one individual to profit that much, while others suffer is broken and in need of repair. Especially considering that most of Paulson's earnings are considered capital gains and not ordinary income and will therefore be taxed at a rate of only 15%.
Thursday, February 10, 2011
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7 comments:
I don't see anything wrong with making 5B as long as it was done in an honest way, without knowingly taking advantage of others to their detriment. Also, in a case like this, hopefully the guy actually does the right thing and tosses a buck or 2 at a charity.
Whoops, didn't mean to go incognito, that was me.
It is an example that demonstrates what is wrong with the tax system. Earned income by someone with a family of 5, will be assessed with an ATM. As compared to the tax assessment of Paulson's capital gains, the system appears unfair.
Yeah, the tax situation is another story completely, but that's not exactly this dude's doing, so I can't fault him for that.
Agree with both Ton and Concierge. More power to this guy and I hope he follows the Buffett/Gates route and does some serious good with that money. You can tell alot about someone's character by how much they give to charity.
As you may have guessed I am totally in favor of Paulson's windfall. He put a great deal of money on the line and deserves to reap the benefits of his daring.
As for the tax issue (Conch means AMT not ATM) the government sents a lower tax rate on capital gains than ordinary income because it wants to encourage investment.
Therefore Paulson gets to pay the same rate on his investment income as the rest of us. Which isn't unfair, it's actually the definition of fair.
Who said PAulson's income will bec apital gains and taxed at 15%? First of all, its only 15% if all his income qualifies as Long Term Capital Gains.
And if it does, $750 million in taxes hardly seems like he got off easy. That's more in taxes than every reader of this blog will pay combined in their lifetimes.
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